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Org 3 - Governance, Selecting a Model

ORGANIZATIONAL STRUCTURE

Part 3:  Selecting a Governance Model

 

The founders must create an organizational structure for operations. The oversight responsibility of a corporation can be divided into governance (of strategic direction and resources) by a board of directors and management (of daily operations) by executives or managers. The governance and management functions may overlap and blend together in a nonprofit more readily than in a for-profit corporation, especially in small organizations. Employees and/or volunteers engage in activities that fulfill the goals of the organization. Member organizations also may have active involvement from the members as the workers or volunteers.

 

Governance is the oversight and policy function of the board of directors. Directors may be “inside” directors involved in the operation, or “outside” directors with no affiliation. The majority of the board should be “outside” directors. Directors of a for-profit business are usually paid fees to serve. Members of the board are not compensated for this role in nonprofit organizations. (Those members of the board who hold management posts may be compensated for the management job, but not for the board role.)

 

The basic role of the board of directors is to set strategic direction, provide the financial resources and write the policies under which the organization will operate. The size (number of directors) and kind of board depend on the purpose and nature of the organization. The board should be large enough to bring diversity of thought, skill and interests, but not so big that it is difficult to reach consensus and transact business. Some nonprofit organizations are member organizations. Some are outgrowths of churches or other previously organized charities. Some stem from the special interests and commitments of individuals. The type of board needed depends on the nature of the organization and the key individuals who will be most involved in the organization. This document will focus on appropriate structures for nonprofit organizations because they dominate the AT field.

 

Board models for nonprofit organizations

 

By law, members of the board of directors have an obligation to oversee the functions of the organization and can be held responsible for certain actions of employees, although that liability is limited to some degree by incorporation. There is no shield for the personal actions of directors.

 

Nathan Garber (of Nathan Garber & Associates, a consulting firm specializing in assistance to nonprofit organizations) has described five different models for nonprofit boards.1 While all boards have the same inherent responsibilities, Garber’s models address different approaches to the relationship between governance (the board of directors) and management. They also reflect different needs related to the mission, age and size of the organization. Briefly, those models are:

 

Advisory Board Model

 

In the advisory model, the board serves in a strong helper/adviser role to the chief executive, who may be the founder or key mover behind the organization. Members are recruited because the chief executive officer (CEO) trusts them, because they have skills the organization cannot afford in management, and/or because they will generate funds and build the image of the organization. In this model, the CEO (management) tends to dominate the board and thereby may compromise the board’s role in governance.

 

Patron Board Model

 

Board members in the patron model have even less influence in governance of the organization than in the advisory model. They are chosen primarily for wealth, influence in the community and commitment to the organization. They are figureheads and fundraisers. They are not likely to provide the guidance needed for strategic planning or program evaluation.

 

Cooperative Board Model

 

The cooperative model attempts to implement collective decision-making by combining the governance and management functions into a peer management system that includes all members of the organization. This may work well as long as all members of the team share equal commitment to the mission, are collaborative and are willing workers. This collective management model ignores the need for evaluation and accountability, and it may break down if the composition of the group changes.

 

Management Team Model

 

Using the management team model, the board operates as a mirror of a functional management team. That is, the board organizes individuals or committees that correspond to management functions (finance, planning, human resources, etc.) In organizations without paid staff, the board designates individuals or committees to fulfill the management needs of the organization. This is very common for nonprofits, and works well for many volunteer-driven entities. Members of the board are recruited for their expertise in certain fields (e.g., accounting or public relations) or because they are members of a special interest group considered to be stakeholders (e.g., fundraising group or volunteers). The problem is that this model, too, encounters problems with the merged and overlapping functions of governance and management. Board members may refuse to delegate authority and that hinders the ability of paid staff and/or volunteers to implement programs. Again, planning and accountability are at risk.

 

Policy Board Model

 

In the policy board model, the job of the is defined as one limited to governance: to establish policies, to delegate responsibility to the management team that will be held accountable for implementing those policies, to monitor compliance with principles and policies, and to ensure that board and management are held accountable for performance. This model places a high level of trust in the chosen leader of management, and it implies that the CEO has adequate human resources, whether paid or volunteer, to implement the programs of the organization without active participation of board members or board committees. Board members are recruited for their commitment to the organization. (This model is used by most major for-profit corporations.)

 

These descriptions may prove useful in selecting the most appropriate model for a new organization.

 

Can an existing organization change its governance model?

 

If the organization has an existing model that is not working effectively, it may change to another model. The difficulty is that the board itself must make the decision and implement the change. Transitioning to a new model is likely to prove a serious challenge, but accordin to Garver, the difficulty may be lessened if circumstances exist that facilitate the change. Among those could be:

major turnover in board members, a CEO who is leaving or has left, board members who are dissatisfied and recognize the need for change, organizational problems resulting from board structure, or a crisis of confidence in the board, or the organization going through a major life-cycle change that demands a new approach.

 See Nathan Garber’s questions (in an attached file) that help to determine whether the organization needs to change its governance model. Working through this activity may help the organizing individuals choose a model for governance. After doing so, examine the model and decide how many members the board will have (preferably an odd number to avoid ties on critical decisions.)

Advisory council

An advisory council may be chosen in addition to a board of directors. Nonprofit organizations often create an advisory council of interested parties and/or members of the community to provide additional advice and counsel. This may further community involvement. The Advisory Council Bylaws for Mississippi’s Project START is an excellent model, both for structuring the council, and for preparing bylaws. See http://www.msprojectstart.org/council.html or the article on drafting bylaws which has the Project START model attached. ________________ 1Garver, Nathan. Governance Models: What’s Right for Your Board, ©1997. Reprinted with permission. Retrieved April 10, 2008, from http://garberconsulting.com/governance%20models%25what%27s%25right.htm

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DISCLAIMER

This work is supported under a five-year cooperative agreement # H235V060016 awarded by the U.S. Department of Education, Office of Special Education and Rehabilitative Services, and is administered by the Pass It On Center of the Georgia Department of Labor – Tools for Life.  However, the contents of this publication do not necessarily represent the policy or opinions of the Department of Education, or the Georgia Department of Labor, and you should not assume endorsements of this document by the Federal government or the Georgia Department of Labor.

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Title: Org 3 - Governance, Selecting a Model
Module: Organization
Author: Trish Redmon
Audience: Administrator
Sub Title:
Procedure:
Organization Source: Pass It on Center
Last Reviewed: 01-23-2009 9:07 AM